"We should get rid of official credit ratings," which only inspire a false sense of confidence, Einhorn says. Investors should decide whether or not they want to pursue the risk or reward associated with each security, he said.

The rating game is rigged, he told CNBC. Big banks and bond buyers have told Congress they like the current system — and the political clout of big bond buyers exerts extreme influence over government decisions.

Government creditworthiness should be determined by the investor, Einhorn says, and while Congress has a rare opportunity to eliminate the rating system, doing so won’t be easy.

We learned the hard way what happens when markets ignore credit risk, Einhorn observes. He said we are “on course for a responsible fiscal policy, irresponsible monetary policy," which is a frightening outlook.

European Commission President Jose Manuel Barroso has announced a proposal to create a European Securities and Markets Authority to monitor and regulate credit rating agencies, All Headline News reports.

The man behind the plan, financial services commissioner Michel Barnier, said "the changes to rules on credit rating agencies will mean better supervision and increased transparency in this crucial sector.”

Under the plan, the regulator can suspend or revoke an agency's license to operate in the European Union or ask the Economic Commission to impose penalties.

Greenlight Capital hedge fund manager David Einhorn says we should ignore credit ratings and assess stocks ourselves.
We should get rid of official credit ratings, which only inspire a false sense of confidence, Einhorn says. Investors should decide whether or not they...